Bitcoin has rallied back to $44,000 following a dip attributed to market uncertainty sparked by a recent Matrixport report.
Released on Tuesday, Matrixport’s report speculates that the SEC will likely reject the Bitcoin Spot ETFs.
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The price of $BTC plummeted ~10% in a short period as #Matrixport predicted in the latest research that the #SEC will reject Bitcoin Spot ETFs.#Coinglass data shows that a long order worth $14.26M was liquidated on #Huobi.https://t.co/MT0EgNW8ib pic.twitter.com/Es7X0Y5MAE
— Lookonchain (@lookonchain) January 3, 2024
The platform maintains that “all applications fall short of a critical requirement that must be met,” influenced by the Democratic-dominated Commissioners’ leadership and the cautious approach towards crypto.
It becomes clear how responsive the market is to rumors and reports, as Matrixport’s speculation quickly triggered an 8.51 percent dip and a big Bitcoin sell-off the very next day. Bitcoin plummeted from $45,308 to $41,454, a decline that triggered liquidation of nearly $600 million in positions, per Coinglass data.
Total open interest fell from $18.66 billion to $17.72 billion. The estimated leverage ratio, calculated by dividing the exchange’s open interest by their coin reserve, sharply dropped from 0.23 to 0.17 during the January 3 crypto crash, indicating a 50 percent reduction in leverage. This decline in the estimated leverage ratio suggests lowered risk and hints at a potential bottom formation in the market.
The currency has now rebounded, standing at $44,199 as per CoinGecko’s Thursday data. Despite the setback on Wednesday, its current value represents a 160.4 percent increase from the previous year.
Even so, Bitcoin is still not on the top gainers’ list, with CoinMarketCap reports that altcoins such as Beam (BEAM) and Celestia (TIA) are currently leading the market.
SEC crypto skepticism
Matrixport’s speculation, organized in a report titled “Why the SEC will REJECT Bitcoin Spot ETFs again,” can be accessed anytime on the website. Led by head analyst Markhus Thielen, the report warns of potential cascading liquidations and a potential -20 percent price decline in the event of the rejection.
Thielen and the team’s prediction is based on considerations of political dynamics and compliance concerns. With a bullish stance in 2023, Matrixport had previously forecasted Bitcoin reaching $45,000 by Christmas and a potential rally to $50,000 by January 2024 if SEC requirements for Bitcoin Spot ETFs were met.
However, the report foresees an SEC rejection in January, as the five-person Democratic-dominated Commissioners’ leadership under chairman Gary Gensler signals reluctance towards crypto approval. Gensler, who has been known to be skeptical of crypto, wants more stringent compliance necessary, which translates to discouraging ETF approval.
Traders, anticipating ETF approval since September 2023, have already injected $14 billion into crypto, with $10 billion linked to ETF expectations. SEC denial could trigger cascading liquidations, impacting $5.1 billion in additional long Bitcoin futures and potentially dropping prices by 20 percent to $36,000 or $38,000.
If no approvals surface by January 5, the report advises traders to hedge by purchasing $40,000 strike puts or consider outright shorting Bitcoin through options. Yet, the report also anticipates higher Bitcoin prices by the end of 2024 (starting at $42,000).
While the report claims that the approval of Bitcoin ETFs is to be pushed until the second quarter of 2024, Matrixport founder Jihan Wu stays optimistic about a Bitcoin ETF’s future.
“Looking at Bitcoin’s history and its future prospects, the current volatility and the potential approval uncertainty of a Bitcoin ETF in January 2024 are ultimately of no importance,” Wu said. “In my opinion, the approval of a Spot ETF by SEC, which will attract fresh investment into Bitcoin, is inevitable.”
This view contrasts his platform’s latest report about possible ETF rejection, but Wu has asserted that it is beyond their control. According to Wu, his analysts have the utmost freedom to “operate independently, expressing their opinions without any influence or interference from management.”
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